Advertisers Wrestle With Where To Spend Media Dollars -- TV Or Online

More than $36 billion in annual advertising on broadcast and cable TV networks rides on estimated audience measurements from third parties. That's a lot of money invested in viewers assumed to have seen commercials and programs, especially when digital technology makes metrics more of an exact science.

Television's distorted ratings status quo must go, and the 2009 federally mandated digital conversion will surely hasten the process.

Meantime, the controversy could boil over into an economic crisis for advertisers wrestling with how much marketing dollars to split between TV -- where they think they still reach the so-called masses -- and more precisely measured online and other digital media -- where there is some individual accountability.

Clearly, the producers and financiers of content, as well as TV distribution gatekeepers, would benefit economically from a more accurate and personal measurement of the consumers reached on all devices and platforms.

So the last thing we need at the start of another hyped TV season is flip resignation from a high-level media executive that television's reproachable ratings system is what it is -- live with it. That's the impression NBC Universal chief executive officer Jeff Zucker gave, appearing on CNBC's Squawk Box Wednesday, to discuss the $60 billion lost in annual revenues due to content piracy.



When asked about the viability of the TV ratings systems, Zucker replied: "They are what we live by and what we all have to judge ourselves by; whether they are accurate or not, whether there are issues or not. We all have to play by the same rules, and we cannot get caught up in saying that's not the rules we should play by."

That kind of stubborn acceptance has Nielsen Media Research thinking it's enough to multiply its metered sampling of selected families and move that process out of homes and to the beach. That kind of passive resistance will keep the ratings sham as a lynchpin of television economics, even as more meaningful metrics and measurement options develop across all media spaces.

In fairness, it is not a problem NBC or Nielsen can resolve alone overnight. It will take a village, and it will take time. But without pragmatic moves in the right direction, inactivity can be misconstrued as ignorance. The absence of viable metrics is the reason advertisers have not moved more of their spending online, as reinforced by a new McKinsey & Co. report and related survey of marketing executives. Is it possible the issues of measurability and accountability could turn on the broadcast and cable networks in one season? They don't want to find out.

The unwieldy distribution, demand, recording and download of television content already makes an accurate aggregated measurement a challenge. But the availability of digital technology makes it possible to try. The Media Ratings Council, charged with auditing audience measurement services, lists on its Web site more than two dozen companies, besides Nielsen, that track and report on all media platforms.

And what about all those page views, podcasts, blogs and social-networking sites where content and advertising appear? The Interactive Advertising Bureau's quest to standardize and sort through the confusion over advanced online audience methodologies is well documented. But even as they are being developed and perfected, more precise metrics are a long way from Nielsen's Live and Live + 3 ratings, which are based on selective sampling, surveys and electronic metering that yield estimated viewing of programs and commercials.

The present challenge is measuring and reconciling the statistical reach of consumers for all TV programs wherever and whenever they are viewed, be it TV, mobile or DVR. The aggregate measurement for programs has to be credible.

But in a new era of personalized, consumer-centric media, why would any company be allowed to think that sampled metering is an acceptable substitute, even as television and other incumbent industries convert to digital measurement and distribution?

It may have something to do with the inextricable broadcast networks and television stations' legacy systems of reporting, using and pricing against those inexact metrics.

Again this fall, industry analysts are hanging on preliminary ratings for the new prime time schedules, calling the fate of broadcast programs and networks, whose collective audience levels declined 10% across all demos the first week. This "inauspicious start to the season," according to Lehman Brothers analyst Anthony DiClemente, represents the greatest ratings slide since the start of the 2004-05 season. The most ad-coveted demo (18-49) is significantly down 15% at both CBS and ABC, 14% at Fox and 8% at NBC.

The bad news is going to get worse as viewers consume more of the broadcast network content in time-shifted, Internet-streaming, direct downloaded ways outside the traditionally measured Nielsen universe, where a single rating now represents 1.3 million TV homes.

"We expect to see fluctuations in the ratings greater than in previous seasons," DiClemente said. "Networks are still developing monetization models for these alternative distribution channels. Significant fluctuations in ratings may translate into some short-term revenues shortfalls, he says, as make-good advertising eats into the total number of ratings points available for sale. While analysts caution making too much of early returns, that general trend most likely will continue, and the corresponding revenue losses will show up on the balance sheets of the broadcast networks and their corporate parents. CBS Corp. could be the most severely impacted, as 34% of its overall earnings is tied to TV advertising and 72% of its overall revenues is from U.S. advertising.

If the networks are serious about generating at least one dollar of new media revenue to replace every dollar of conventional advertising lost, they had best throw their money and energy behind measurement systems that certify reach on all platforms. And they can't do that with their head in the sand.

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